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Groupon and the $1 Billion Challenge

by: YOUNG MONEY Staff

The online social-discounting site Groupon.com is, by some measures, the fastest-growing business in the world. It took young entrepreneur Andrew Mason – who got a bachelor’s degree in music from Northwestern University – to get his company to a valuation of $1.35 billion, as Forbes magazine reports.

Groupon is on track, the magazine says, to rake in $500 million in revenue this year. If it can maintain growth, it will have over $1 billion in revenue within a little over 2 years, faster than any company in history. According to data from Forbes, Priceline took about 2.5 years to hit that figure, while Amazon, the next-fastest, took nearly 5 years.

The company has become a legitimate social and web phenomenon, working itself into internet lexicon and spawning dozens, if not hundreds, of copycat ventures.

The Groupon model is simple: the site offers a deal, usually one per day in a variety of metropolitan areas, and if a certain number of people bite, the deal "tips." If it doesn’t get enough purchases, it’s a no-go.

This helps retailers – they know their sale will be well-rewarded – and Groupon takes about 50 percent of the haul. These days, over 98 percent of the sales tip, according to Forbes.